Mark Thompson is turn­ing Concordia Healthcare into an M&A ma­chine in phar­ma­ceu­ti­cals.

Mark Thompson has Concordia Healthcare on the verge of some­thing big

National Post (Latest Edition) - Financial Post Magazine - - COLUMNS&DEPARTMENTS -

Mark Thompson is not a doc­tor. He’s not even a phar­ma­cist. In­deed, he didn’t know any­thing about the health-care in­dus­try when he en­tered it in 2001 af­ter a head­hunter came look­ing for some­one to do in-house le­gal work for Bio­vail Corp. But in­vestors can be for­given if they feel this lawyer turned bud­ding pharma mag­nate has the right pre­scrip­tion for suc­cess. Thompson founded Concordia Healthcare Corp. in De­cem­ber 2012 and took it public a year later. Since then, its stock has grown 1,264%, from around $7.50 to more than $90 as of mid-Septem­ber, a week af­ter he pulled off the big­gest deal in Concordia’s short ex­is­tence: a US$3.5-bil­lion stock-and-cash deal for Amdipharm Mer­cury Ltd., oth­er­wise bet­ter know as AMCo, a Lon­don-based multi­na­tional pharma with well over 100 prod­ucts and a ge­o­graph­i­cal reach into more than 100 coun­tries.

It’s the kind of bold deal in­vestors have been wait­ing for from what one an­a­lyst re­ferred to as a baby ver­sion of Valeant Phar­ma­ceu­ti­cals In­ter­na­tional Inc., which has grown into one of Canada’s big­gest com­pa­nies by mar­ket cap by mak­ing a seem­ingly nev­erend­ing se­ries of ac­qui­si­tions. Such com­par­isons of­ten ran­kle ex­ecs at the smaller com­pany, but Thompson doesn’t shy away from them. “It doesn’t bug me. Mike Pear­son has done an amaz­ing job of grow­ing Valeant,” he says. “The op­por­tu­nity size that moves our nee­dle is still very much smaller than what would move Valeant’s nee­dle. We have some de­vel­op­ment work on­go­ing, but so does Valeant, so there re­ally aren’t a huge amount of dif­fer­ences be­tween what the or­ga­ni­za­tions do.”

Nev­er­the­less, the AMCo deal wouldn’t have even hap­pened six months ago. The math, Thompson says, sim­ply wouldn’t have worked. But that was be­fore he pulled the trig­ger on a smaller deal, buy­ing 18 prod­ucts from Co­vis Pharma SARL and Co­vis In­jecta­bles SARL for US$1.2 bil­lion. He will soon have his sights on even big­ger fish. “Pre-Co­vis, we couldn’t have done this deal. Af­ter Co­vis, we can do this deal,” he says. “Now af­ter this deal closes, we could do some­thing that is larger than this trans­ac­tion, once we get to this place where we can fi­nan­cially achieve that.”

That said, the AMCo deal will trans­form Concordia from a re­gional player to a global en­tity. Concordia started with three prod­ucts and sold them only in the U.S. Once the deal closes, it will have

more than 200 prod­ucts and be able to sell them — and any oth­ers it ac­quires — into over 100 coun­tries. It also gets a “cen­tre of ex­cel­lence” in In­dia that has 200 em­ploy­ees do­ing back-of­fice work such as reg­u­la­tory pa­per­work, sup­ply chain and fi­nance, much of it the type of work that Concordia cur­rently out­sources. “We’ll have this global ma­chine that we can drop more prod­ucts into on a very seam­less ba­sis,” he says. “It re­ally opens up the world for new and in­ter­est­ing deals. The amount of in­bound stuff we get now is more than we have ever had.”

It’s a long way from the Hill where Thompson worked af­ter grad­u­at­ing with a law de­gree from the Univer­sity of Ot­tawa. He then worked for a cou­ple of years at Osler, Hoskin & Har­court LLP, where he re­al­ized prac­tis­ing law was not some­thing he wanted to do, and then a cou­ple of years do­ing busi­ness de­vel­op­ment at Imax Corp., where he re­al­ized that the pun­ish­ing travel sched­ule he was on wasn’t good for a fa­ther of three young chil­dren. For­tu­itously, that’s when Bio­vail’s head­hunter came call­ing. “I knew noth­ing about the in­dus­try at that point, and that was at the start of 2001,” he says. “I didn’t know any­thing about Bio­vail ei­ther when I went there.”

But he fig­ured that health care was re­ces­sion proof, and that idea has held up to this day. Although pharma val­u­a­tions are soar­ing, par­tic­u­larly in Canada where in­vestors plow into the sec­tor as they flee energy and re­sources, Thompson isn’t too wor­ried about a pos­si­ble re­ver­sal if those two sec­tors re­bound. He ad­mits it can be frus­trat­ing to watch his stock swing be­cause of head­winds caused by the slump­ing re­source sec­tors, but says health care typ­i­cally per­forms well be­cause medicine is at the top of peo­ple’s hi­er­ar­chy of needs. And, for the most part, the ex­penses to cre­ate Concordia’s drugs have al­ready long since passed, so the com­pany is in the col­lec­tion phase of those drugs’ life­cy­cles, which can be ex­tended ones.

“Old prod­ucts that work con­tinue to be pre­scribed for a long, long time,” Thompson says. “Don­na­tal, which is still our big­gest prod­uct, was ap­proved in 1936 and there are still 400,000 pre­scrip­tions writ­ten in the U.S. ev­ery year for that prod­uct. The rea­son for that is it works.” Much like his M&A strat­egy so far.

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